# THE DIRECTOR STEEL AUTHORITY OF INDIA LTD v. ISPAT KHADAN JANTA MAZDOOR UNION

- **Citation:** [2019] 9 S.C.R. 123
- **Court:** Supreme Court of India
- **Decided:** 2019-07-05
- **Case number:** Civil Appeal Nos. 8081-8082 of 2011
- **Bench:** A. M. Khanwilkar, Ajay Rastogi
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/the-director-steel-authority-of-india-ltd-v-ispat-khadan-janta-mazdoor-union-34011
- **Pages:** 30

## Headnote

Contract Labour (Regulation & Abolition) Act, 1970 - ss.7,
10(1), 12, 23 and 25 - Tripartite agreement entered between the
appellant, contractors and contract labour (working in the captive
mines of the appellant) as per which the contract labours were paid
due wages, not less than the rates prescribed under the 1948 Act -
Prohibition notification dated 17th March, 1993 issued by the
appropriate Government u/s.10(1) of the CLRA Act - No fresh
agreement, in the interregnum period, was executed - Existing
agreement was extended from time to time and the contract labour
was allowed to continue on the same terms and conditions, till their
services were terminated by the contractor in April, 1996 - Matter
eventually referred to the Central Government Industrial Tribunal
(CGIT) - CGIT inter alia held that the contract between the appellant
and the contractors was genuine and not sham and bogus - High
Court reversed the finding and held the contract to be sham and
bogus - On appeal, held: Supreme Court in the Constitution Bench
judgment in Steel Authority of India Ltd. made it clear that neither
s.10 nor any other provision in the CLRA Act provides for automatic
absorption of contract labour on issuance of prohibition notification
u/s.10(1) of the CLRA Act, and consequently the principal employer
is not under legal obligation to absorb the contract labour working
in the establishment - Tribunal rightly concluded that the contract
was not sham and bogus and there shall be no automatic absorption
of contract labour on issuance of prohibition notification under
the CLRA Act - However, the finding of the CGIT that after the
issuance of prohibition notification, the contract became sham and
bogus is not sustainable - Mere issuance of the prohibition
notification under CLRA Act will not make the contract/agreement
void ab initio or bad in law - If the employees are allowed to continue
in terms of the earlier agreement after the prohibition notification
[2019] 9 S.C.R. 123
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came into force, it may be illegal and continuance of service in the
absence of any contract has to face the penal consequences under
the CLRA Act - Impugned judgment set aside - Minimum Wages
Act, 1948 - Industrial Disputes Act, 1947 - s.10(1), 25(H)-
Constitution of India - Arts. 12, 226 and 227 - Indian Contract
Act, 1872 - s.23.
Contract Labour (Regulation & Abolition) Act, 1970 - Scheme
of - Discussed.
Disposing of the appeals, the Court
HELD: 1.1 The exposition of the judgment of the
Constitution Bench of Supreme Court in Steel Authority of India
Ltd. and Others vs. National Union Waterfront Workers and Others
made it clear that neither Section 10 nor any other provision in
the CLRA Act provides for automatic absorption of contract labour
on issuing a notification by the appropriate Government under
Section 10(1) of the CLRA Act, and consequently the principal
employer is not required or is under legal obligation by operation
of law to absorb the contract labour working in the establishment.
It was further held that on a issuance of notification under Section
10(1) of the CLRA Act, prohibiting employment of contract labour
in any process, operation or other work, if an industrial dispute
is raised by any contract labour in regard to condition of service,
it is for the industrial adjudicator to consider whether the
contractor has been interposed either on the ground of having
undertaken to produce any given result for the establishment or
for supply of contract labour for work of the establishment under
a genuine contract, or as a mere ruse/camouflage to evade
compliance with various beneficial legislations so as to deprive
the workers of statutory benefits. If the contract is found to be
sham, nominal or camouflage, then the so-called labour will have
to be treated as direct employee of the principal employer and
the industrial adjudicator should direct the principal employer to
regulari

## Text

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THE DIRECTOR STEEL AUTHORITY OF INDIA LTD.
v.
 ISPAT KHADAN JANTA MAZDOOR UNION
(Civil Appeal Nos. 8081-8082 of 2011)
 JULY 05, 2019
[A. M. KHANWILKAR AND AJAY RASTOGI, JJ.]
Contract Labour (Regulation & Abolition) Act, 1970 - ss.7,
10(1), 12, 23 and 25 - Tripartite agreement entered between the
appellant, contractors and contract labour (working in the captive
mines of the appellant) as per which the contract labours were paid
due wages, not less than the rates prescribed under the 1948 Act -
Prohibition notification dated 17th March, 1993 issued by the
appropriate Government u/s.10(1) of the CLRA Act - No fresh
agreement, in the interregnum period, was executed - Existing
agreement was extended from time to time and the contract labour
was allowed to continue on the same terms and conditions, till their
services were terminated by the contractor in April, 1996 - Matter
eventually referred to the Central Government Industrial Tribunal
(CGIT) - CGIT inter alia held that the contract between the appellant
and the contractors was genuine and not sham and bogus - High
Court reversed the finding and held the contract to be sham and
bogus - On appeal, held: Supreme Court in the Constitution Bench
judgment in Steel Authority of India Ltd. made it clear that neither
s.10 nor any other provision in the CLRA Act provides for automatic
absorption of contract labour on issuance of prohibition notification
u/s.10(1) of the CLRA Act, and consequently the principal employer
is not under legal obligation to absorb the contract labour working
in the establishment - Tribunal rightly concluded that the contract
was not sham and bogus and there shall be no automatic absorption
of contract labour on issuance of prohibition notification under
the CLRA Act - However, the finding of the CGIT that after the
issuance of prohibition notification, the contract became sham and
bogus is not sustainable - Mere issuance of the prohibition
notification under CLRA Act will not make the contract/agreement
void ab initio or bad in law - If the employees are allowed to continue
in terms of the earlier agreement after the prohibition notification
[2019] 9 S.C.R. 123
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came into force, it may be illegal and continuance of service in the
absence of any contract has to face the penal consequences under
the CLRA Act - Impugned judgment set aside - Minimum Wages
Act, 1948 - Industrial Disputes Act, 1947 - s.10(1), 25(H)-
Constitution of India - Arts. 12, 226 and 227 - Indian Contract
Act, 1872 - s.23.
Contract Labour (Regulation & Abolition) Act, 1970 - Scheme
of - Discussed.
Disposing of the appeals, the Court
HELD: 1.1 The exposition of the judgment of the
Constitution Bench of Supreme Court in Steel Authority of India
Ltd. and Others vs. National Union Waterfront Workers and Others
made it clear that neither Section 10 nor any other provision in
the CLRA Act provides for automatic absorption of contract labour
on issuing a notification by the appropriate Government under
Section 10(1) of the CLRA Act, and consequently the principal
employer is not required or is under legal obligation by operation
of law to absorb the contract labour working in the establishment.
It was further held that on a issuance of notification under Section
10(1) of the CLRA Act, prohibiting employment of contract labour
in any process, operation or other work, if an industrial dispute
is raised by any contract labour in regard to condition of service,
it is for the industrial adjudicator to consider whether the
contractor has been interposed either on the ground of having
undertaken to produce any given result for the establishment or
for supply of contract labour for work of the establishment under
a genuine contract, or as a mere ruse/camouflage to evade
compliance with various beneficial legislations so as to deprive
the workers of statutory benefits. If the contract is found to be
sham, nominal or camouflage, then the so-called labour will have
to be treated as direct employee of the principal employer and
the industrial adjudicator should direct the principal employer to
regularise their services in the establishment subject to such
conditions as it may specify for that purpose in the facts and
circumstances of the case. On the other hand, if the contract is
found to be genuine and a prohibition notification has been issued
under Section 10(1) of the CLRA Act, in respect of the
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establishment, the principal employer intending to employ regular
workmen for the process, operation or other work of the
establishment in regard to which the prohibition notification has
been issued, it shall give preference to the erstwhile contract
labour if otherwise found suitable, if necessary by giving relaxation
of age as it appears to be in fulfilment of the mandate of Section
25(H) of the Industrial Disputes Act, 1947. [Paras 33-35]
[146-F-H; 147-A-D]
1.2 It was not disputed in the instant case that the contract
labourer who were working under a tripartite agreement were
allowed to continue under the self-same agreement executed prior
to the prohibition notification dated 17th March, 1993 and
extended from time to time by the competent authority even after
issuance of the prohibition notification and the services of the
contract workers were terminated by the contractor through whom
they were engaged after they proceeded on strike in April, 1996.
The Tribunal in its award dated 16th September, 2009 has recorded
a finding of fact based on oral and documentary evidence placed
by the respective parties on record in reference to the fact whether
the contract was sham and bogus which was a primary cause of
adjudication and it was observed that the contractors employed
the contract labour on their own and they were the appointing
authority. Witnesses, contract labourer were examined and in
their cross-examination they have stated that before the issuance
of notification dated 17th March, 1993, they were workers of the
contractor and payment was made to them by the contractors,
wage slips also show that the wages were being paid by the
contractors. There was no fresh contract ever entered between
the parties. Exh. M/8 filed in R-721/05 and the evidence of the
witnesses shows that the contractor had terminated the services
of the contract labour in April 1996 and transferred some of the
contract labourers from the place of work and was the disciplinary
authority. It was further observed that the contractors had full
control over the skilled and professional work and the SAIL had
right to reject the limestone, if it was not within the specified
approved grade as per terms and conditions of the agreement
and after extensive appreciation of the oral/documentary evidence
on record, CGIT recorded a finding of fact holding that the
contract was not sham and bogus at least up to the date of issuance
DIRECTOR STEEL AUTHORITY OF INDIA LTD. v. ISPAT
KHADAN JANTA MAZDOOR UNION
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of the prohibition notification dated 17th March, 1993. Although
in paragraph 85 of the award the Tribunal has recorded a finding
that after the issuance of prohibition notification dated 17th March,
1993 by operation of law, it became sham and bogus but such a
finding recorded in para 85 of the Award dated 16th September,
2009 is not sustainable in law for the simple reason that mere
issuance of the prohibition notification under CLRA Act will not
make the contract/agreement to be void ab initio or bad in law
and if the employees are allowed to continue in terms of the earlier
agreement after the prohibition notification under CLRA Act has
come into force, it may be illegal and continuance of service in
the absence of any contract which stands extinguished by virtue
of prohibition notification has to face the penal consequences as
embedded under the scheme of CLRA Act. The High Court has
taken note of the various provisions of Mines Creche Rules,
1966, Maternity Benefits Act, Mines Act, 1952 and Metalliferous
Mines Regulations, 1961 and other statutory measures which
are applicable over the establishment of the appellant including
various welfare schemes which provide safety and security of the
workers. To say so, every establishment is under obligation to
implement the mandate of law but that could not be a determining
factor/denominator to test the contract agreement entered
between the parties in arriving to a conclusion that such an
agreement is sham, nominal or camouflage as held by the High
Court in its impugned judgment. [Paras 39-42] [148-F-H;
149-A-H; 150-A-C]
1.3 The finding recorded by the High Court under the
impugned judgment is not sustainable for the reason that effect
of the prohibition notification under Section 10(1) of CLRA Act
has been settled by the Constitution Bench of this Court in Steel
Authority of India Ltd. and Others and this Court has made it clear
that neither Section 10 nor any provision in the CLRA Act
provides for automatic absorption of contract labour on issuance
of prohibition notification by the appropriate Government under
Section 10(1) of the CLRA Act and the Tribunal in the first place
being the fact finding authority has extensively examined the
documentary and oral evidence which came on record and also
the relationship of principal employer, contractor and contract
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labour and the fact that their services were terminated by the
contractor after the contract labour proceeded on a strike in April
1996. The Tribunal also considered various other factors in
extenso regarding the wage slips, identity cards and the nature
of work being discharged by the contract labour subsequent to
the prohibition notification dated 17th March, 1993 and other
documentary evidence which came on record and recorded the
finding in return that the contract between the contractor and
the employee was not sham and bogus and the workmen were
not entitled for their absorption in service of the principal
employer. [Paras 44, 45] [150-H; 151-A-D]
1.4 To test it further, apart from the statutory compliance
which every principal establishment is under an obligation to
comply with, its non-compliance or breach may at best entail in
penal consequences which is always for the safety and security of
the employee/workmen which has been hired for discharge of
the nature of job in a particular establishment. If the scheme of
the CLRA Act and other legislative enactments which the
principal establishment has to comply with under the mandate of
law and taking note of the oral and documentary evidence which
came on record, the finding which has been recorded by the CGIT
under its award dated 16th September, 2009 in absence of the
finding of fact recorded being perverse or being of no evidence
and even if there are two views which could possibly be arrived
at, the view expressed by the Tribunal ordinarily was not open to
be interfered with by the High Court under its limited scope of
judicial review under Article 226/227 of the Constitution of India
and this exposition has been settled by this Court in its various
judicial precedents. It is true that judgment in Dena Nath and
Others is in reference to failure of compliance of Section 7 and 12
and not in reference to Section 10(1) of the CLRA Act but if the
scheme of CLRA Act is looked into which is a complete code in
itself, non-compliance or violation or breach of the provisions of
the CLRA Act, it result into penal consequences as has been
referred to in Sections 23 to 25 of the Act and there is no provision
which would entail any other consequence other than provided
under Section 23 to 25 of the Act. [Paras 46-48] [151-E-H;
152-A-C]
DIRECTOR STEEL AUTHORITY OF INDIA LTD. v. ISPAT
KHADAN JANTA MAZDOOR UNION
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1.5 The Tribunal under its award dated 16th September,
2009 rightly arrived to the conclusion that the contract was not
sham and bogus and there shall be no automatic absorption of
contract labour on issuance of a prohibition notification under
the CLRA Act and the High Court committed manifest error in
reversing the finding of fact in return under its impugned
judgment. The impugned judgment of the High Court is set aside.
The respondent is at liberty to avail remedy for alleged breach of
the provisions of the CLRA Act, if so advised, in accordance with
law. [Paras 49, 50] [152-D-F]
Steel Authority of India Ltd. and Others v. National
Union Waterfront Workers and Others (2001) 7 SCC
1 : [2001] 2 Suppl. SCR 343 - followed.
International Airport Authority of India v. International
Air Cargo Workers' Union and Another (2009) 13
SCC 374 : [2009] 8 SCR 1 - relied on.
Air India Statutory Corporation and Others v. United
Labour Union and Others (1997) 9 SCC 377 :
[1996] 9 Suppl. SCR 579 ; Dena Nath and Others v.
National Fertilisers Ltd. and Others (1992) 1 SCC 695
: [1991] 2 Suppl. SCR 401 ; Silver Jubilee Tailoring
House and Others v. Chief Inspector of Shops and
Establishments and Another (1974) 3 SCC 498:
[1974] 1 SCR 747; Hussainbhai, Calicut v. Alath
Factory Thezhilali Union, Kozhikode and Others
(1978) 4 SCC 257 : [1978] 3 SCR 1073; Indian
Petrochemicals Corporation Ltd. and Another v. Shramik
Sena and Others (1999) 6 SCC 439 : [1999] 1 Suppl.
SCR 47 - referred to.
Case Law Reference
[2001] 2 Suppl. SCR 343
 followed
Para 1
[1996] 9 Suppl. SCR 579
 referred to
Para 7
[1991] 2 Suppl. SCR 401
 referred to
Para 22
[1974] 1 SCR 747
 referred to
Para 36
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[1978] 3 SCR 1073
referred to
Para 36
[1999] 1 Suppl. SCR 47
referred to
Para 36
[2009] 8 SCR 1
relied on
Para 37
CIVIL APPELLATE JURISDICTION: Civil Appeal
Nos. 8081-8082 of 2011
From the Judgment and Order dated 06.09.2010 of the High Court
of Madhya Pradesh, Principal Seat at Jabalpur in Writ Petition
Nos. 10963 and 12485 of 2009
With
Civil Appeal No. 8084 of 2011.
Ranjit Kumar, Parag P. Tripathi, Colin Gonsalves, Ajit Kumar Sinha,
Ms. Indira Nair, Sr. Advs., Sunil Kumar Jain, Punya Garg,
R. C. Shrivastava, Abhishek Jain, T. G. Narayanan Nair, A. K. Sasidharan,
K. N. Madhusoodhanan, C. N. Sree Kumar, M. T. George, Ramesh
Babu M. R., Amit Sharma, Ms. Malavika B. Pillai, Advs. for the
appearing parties.
The Judgment of the Court was delivered by
RASTOGI, J. 1. These appeals arise from the judgment dated
6th September, 2010 passed by the Division Bench of the High Court of
Madhya Pradesh in Writ Petition No. 10963 of 2009 and 12485 of 2009
setting aside the award passed by the Central Government Industrial
Tribunal(CGIT), Jabalpur dated 16th September, 2009 answering the
reference in the affirmative form and directing the contract labourers
who were in the employment of SAIL from 1993 till 1996(17th March,
1993 to April 1996) to be reinstated, and their cases be considered for
regularisation in accordance with Para 125 of the Judgment of this Court
in Steel Authority of India Ltd. and Others Vs. National Union
Waterfront Workers and Others1 declining to grant them back wages.
2. The case involves a chequered history and almost after four
rounds of litigation, the matter has reached at a stage where the reference
was made by the appropriate Government under Section 10(1) of the
Industrial Disputes Act, 1947 to decide the industrial dispute raised by
the Union, namely, Ispat Khadan Janta Mazdoor Union vide notification
dated 27th January, 2003 followed with 22nd February, 2005.
DIRECTOR STEEL AUTHORITY OF INDIA LTD. v. ISPAT
KHADAN JANTA MAZDOOR UNION
1 2001 (7) SCC 1
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3. The seminal facts in brief which may be relevant for the present
purpose are that the appellant Steel Authority of India Limited (hereinafter
being referred to as "SAIL") is a Government of India undertaking and
is a State within the meaning of Article 12 of the Constitution of India
and has steel plants in different parts of India. SAIL has one of the
captive lime stone and dolomite mines in Kuteshwar in the District of
Katni of Madhya Pradesh. Limestone and Dolomite are necessary
ingredients for manufacture of steel. The SAIL did blasting work as this
work had been departmentalised vide Notification dated 15th December,
1979 w.e.f. 22nd June, 1980. The contract labour of the contractors at
Kuteshwar Lime Stone Mines were doing the same jobs as enumerated
in schedule of the prohibition Notification No. S.O. 707 dated 17th March,
1993 issued under Section 10(1) of the Contract Labour(Regulation &
Abolition) Act, 1970(hereinafter referred to as "CLRA Act").
4. It is not disputed that the establishment of the appellant(SAIL)
is the registered establishment in terms of Section 7 of the CLRA Act
and the contractors through whom the contract labour was engaged
were also holding a valid licence under Section 12 of the CLRA Act and
the workmen engaged as contract labour by the contractor in the
establishment of the appellant(SAIL) were paid their due wages in terms
of the tri-partite agreement entered into from time to time not less than
the rates so prescribed by the authority under the Minimum Wages Act,
1948.
5. The appropriate Government at a later stage issued a prohibition
notification of employment of contract labour for the establishment
wherein their services hired by the appellant SAIL under Section 10(1)
of the CLRA Act dated 17th March, 1993, the extract of which is referred
to hereunder:-
"4. The Notification No.S.O.707 dated 17-3-93 was issued and
published by the Government of India whereby prohibited with
effect from the date of publication of this notification, the
employment of Contract Labour in the works specified in the
following schedule in the Lime Stone and Dolomite Mines in the
country namely:
 SCHEDULE
a. Raising of minerals including breaking sizing sorting of Lime
Stone Dolomite and,
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b. Transportation of limestone and dolomite which includes
loading and unloading from trucks, dumpers, conveyors and
transportation from mine site to factory."
6. Pursuant to a prohibition notification issued by the appropriate
Government under Section 10(1) of the CLRA Act, the relationship of
contractor and contract labour stands ceased and by legal fiction, contract
comes to extinct and the indisputed fact which has come on record is
that no fresh agreement, in the interregnum period, was executed and
the existing agreement to whom the appellant & contract labour is a
signatory was extended from time to time by the competent authority
and the contract labour was allowed to continue on the same terms and
conditions till their services were terminated by the contractor in the
month of April, 1996.
7. Prior to the judgment of the Constitution Bench of this
Court[Steel Authority of India Ltd. and Others(supra)], the three
Judge Bench of this Court in Air India Statutory Corporation and
Others Vs. United Labour Union and Others2 discussed the legal
consequence of the prohibition notification under Section 10(1) of the
CLRA Act prohibiting employment of contract labour, it was held that
on abolition of contract labour system from any establishment under
Section 10 of the Act by the appropriate Government, the logical and
legitimate consequences were that the erstwhile regulated contract
labourer covered by the sweep of such abolition for the activities
concerned would be entitled to be treated as direct employee of the
employer on whose establishment they were earlier working and they
would be entitled to be treated as regular employees from the day on
which the contract labour system in the establishment for the work which
they were doing gets abolished.
8. The effect of the prohibition notification under Section 10(1) of
the CLRA Act issued by the appropriate Government at the later stage,
came to be examined by the Constitution Bench of this Court in Steel
Authority of India Ltd. and Others (supra) wherein it was held that
there is no provision under CLRA Act whether expressly or necessary
implication which provides for automatic absorption of contract labour
on issuance of a notification by the appropriate Government under Section
10(1), prohibiting employment of contract labour in any process, operation
DIRECTOR STEEL AUTHORITY OF INDIA LTD. v. ISPAT
KHADAN JANTA MAZDOOR UNION [RASTOGI, J.]
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or other work in any other establishment and overruled the judgment in
Air India Statutory Corporation and Others (supra) making it clear
that neither Section 10 nor any other provision in the CLRA Act provides
for automatic absorption of contact labour on issuance of a notification
by the appropriate Government under Section 10(1) of the CLRA Act
and consequently the principal employer is not required by operation of
law to absorb the contract labour working in the establishment. The
exposition of law will be discussed at the later stage.
9. It reveals from the record that after the Constitution Bench
Judgment of this Court, the matter was agitated by the workers union
before the appropriate Government and after failure of the conciliation
proceedings, the case of 3404 workmen was referred for adjudication
by the appropriate Government vide its notification dated 27th January,
2003 followed with 22nd February, 2005 to the Central Government
Industrial Tribunal(CGIT) is reproduced hereunder:-
1."The Government of India, Ministry of Labour vide its
Notification No.L-29011/97/2002-IR(M) dated 27-1-2003
has referred the following dispute for adjudication by this
tribunal:-
"I. "Whether the action of the Mines Manager, Koteshwar Lime
Stone Mines of Steel Authority of India Ltd. in terminating
services of 3404 (3380+24- as per list attached) mine workers in
April 1996 who ceased to be contract labour after prohibition of
employment of contract labour in Lime Stone Mine vide
Notification No.S.O.707 dated 17-3-93 was legal, fair and
justified? If not, what relief the concerned workmen or heirs in
case of deceased worker are entitled to?
II. Whether the action of the Mines manager, Koteshwar Lime
Stone Mines of Steel Authority of India ltd. in denying terminal
benefits of gratuity retrenchment compensation and exgratia
applicable to VRS seeking employees is fair and justified. If not,
to what relief these workers/heirs are entitled to?
III. Whether the action of the management of the Mines
Manager, Koteshwar Lime Stone Mines of Steel Authority of
India Ltd. in disregarding Clause-8 of Memorandum of
Agreement signed between the Steel Authority of India, New
Delhi and their Unions including HMS and employing workers
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through contractors on jobs of permanent and perennial nature in
Mines between 5-20 years even without ensuring statutory wages
and service conditions was legal, fair and justified? If not, to what
relief concerned workmen/heirs are entitled?"
CORRIGENDUM
"Whether the employment of the workmen mentioned in this
Ministry's order of even number dated 27-1-2003 through
contractors is sham and bogus and whether in effect there is
direct employment by the company? If so, to what relief the
workmen concerned are entitled?"
10. The learned Tribunal(CGIT), as a fact finding authority, taking
note of the pleadings on record framed the following issues:-
"I. Whether the reference R/40/03 is maintainable?
II. Whether the employment of the workmen through
contractors is sham and bogus and whether the said employment
is considered to be direct employment by the management?
III. Whether the action of the Mines Manager, Kuteshwar Lime
Stone Mines of the Steel Authority of India Ltd. in terminating the
services of 3404(3380+24) as per list attached mine workers in
April 1996 who ceased to be contract labour after prohibition of
employment of contract labour in lime stone vide Notification
No.S.O.707 dated 17-03-93 was legal, fair and justified?
IV. Whether the said contact workers/heirs are entitled the
terminal Benefits of gratuity, retrenchment compensation and
ex-gratia applicable to VRS from SAIL?
V. Whether Lime Stone Mines violated the provision of Clause-8
of the memorandum of agreement signed between the SAIL, New
Delhi and their Unions and employing workers through
contractors on jobs of permanent and perennial nature was
justified, legal and fair?
VI. Whether the workmen/heirs are entitled to the wages to the
post in which they were engaged with parity of wages with that
of regular employees of the management with all consequential
benefits?
VII. Any other relief, the workmen/heirs are entitled to?"
DIRECTOR STEEL AUTHORITY OF INDIA LTD. v. ISPAT
KHADAN JANTA MAZDOOR UNION [RASTOGI, J.]
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11. The parties to the reference were called upon to lay evidence
in support of their respective claim and after taking note of the
evidence(oral & documentary), the Tribunal recorded the facts in seriatim
emerging from the records as under:-
(1) The evidence shows that the respective contractors employed
the contract labours for their own and they were the
appointing authority.
(2) Wage slips, wagesheets and the evidence of the witnesses
clearly show that the contractors were paying wages to the
contract labours.
(3) Exhibit M/8 filed in R721/05 and the evidence of the
witnesses show that the contractor dismissed the employee
and also transferred some of the employees from the place of
work and had disciplinary authority.
(4) The contract papers entered into between the management
and the contractors and the evidence of the witnesses clearly
show that contractors had full control and supervision over the
work. The management had only to see that the labour laws
were being implemented and specified approved grade of lime
stone was being supplied.
(5) The contract papers and the evidence show that the
contractors had full control over the skilled and professional
work.
(6) It is further clear from the contract papers that the SAIL had
right to reject the limestone, if it was not within the specified
approved grade as per terms and conditions of the agreement.
(7) The contract agreements further show that there was penal
clause, if there was any breach of contract.
12. The Tribunal taking note of the evidence including oral and
documentary adduced in support of the reference held that the contract
between the Management(SAIL) and the contractors was genuine and
not sham and bogus and the contract workers were allowed to continue
even after the prohibition notification under Section 10(1) dated
17th March, 1993 under the CLRA Act on the same terms and conditions
and the services of the contract labourer were terminated by the
Contractor in April, 1996.
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13. It may be noted that status of the workers after the issuance
of notification dated 17th March, 1993 has also been examined by the
Tribunal and held as follows:-
(1) The contract labours after notification cease to function.
(2) The contract labours were still working in the establishment
from 1993 to April 1996 under the umbrella of the contractors
who may be called as agent of the Principal employer or were
intermediary between the contract labours and the Principal
Employer after the publication of notification.
(3) The contract between the Principal Employer and the
contractors after publication of the notification ceases to exist
and became not genuine.
(4) The wages were being paid to the contract labour by the so
called contractors in the same way as from before.
(5) The principal Employer was in need of the workers for the
specified works even after the publication of the notification
as same workers were continuing in work till April, 1996.
(6) There is no evidence on the record to show that the principal
employer adopted the procedure of regularization and had intended to employ regular workers as has been directed by the
Hon'ble Apex Court at Para 125 sub-para-6 in the Constitution Bench Judgment in the case of SAIL versus National
Union Water Front Workers (Supra) after the contract was
found genuine before the notification.
(7) There was no automatic absorption of contract labour on
issuing the notification prohibiting the employment of contract
labours.
(8) Contract labours were found employees of the respective
contractors before notification.
14. At the same time, in para 85 of the Award, the Tribunal further
held that after issuance of the prohibition notification dated 17th March,
1993 in the instant case, the principal employer(SAIL) was prohibited to
employ any contract labour in any process, operation or other work in
the establishment and when the contract with the contractors after
prohibition notification became void and not genuine and the extension
DIRECTOR STEEL AUTHORITY OF INDIA LTD. v. ISPAT
KHADAN JANTA MAZDOOR UNION [RASTOGI, J.]
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of the period of contract of the respective contractors which has been
allowed to continue in the establishment by operation of law became
ab-initio void and sham and bogus. Para 85 of the Award is as under:-
"85. It is an established fact that the notification dated 7-3-93
came to the effect prohibiting the employment of contract labours
from the date of its publication. As such, in the light of the
constitutional bench judgment in SAIL versus National Water Front
Workers Union & others (Supra) the contract of Principal
employer with contractor in regard to the contract labour comes
to an end beyond shadow of doubts and the contract with regard
to the contract labours subsequently after the notification dated
17-3-1993 becomes not genuine. The Principal employer was
prohibited to employ any contract labour in any process,
operation or other work in the establishment in any process,
operation or other work in the establishment to which the
notification relates at any time thereafter. It is evident that when
the contract of the contractors after notification became itself
void and not genuine, the extension of the period of contract of
the respective contractors would be ab-initio void and sham and
bogus. Thus it is established that the contract of Principal
employer with contractors in regard to the contract labours
became subsequently sham and bogus after the notification No.
S.O. 707 dated 17-3-1993 coming into the effect from the date of
its publication."
15. The Tribunal finally held that the employment of the contract
labourer through contractors was not sham and bogus before notification
dated 17th March, 1993, but after publication of the said notification, by
operation of law, the contract through contractors could not be considered
to be genuine but became void and sham as the contract labour was
allowed to continue in the establishment till April 1996. It was further
observed that the Union is at liberty to take recourse of the penal
consequences as mandated under Section 23 to 25 of the CLRA Act.
Rest of the issues framed by the Tribunal(Issue nos. 3,4, 5 & 6) have
been consequently decided accordingly under the Industrial Award dated
16th September, 2009.
16. The appellant(SAIL) and the workers Union both filed writ
petitions in the High Court of Madhya Pradesh. The Union assailed the
award dated 16th September, 2009. At the same time, SAIL challenged
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the finding which was recorded in reference to the consequence of the
prohibition notification as observed in Para 85 to that extent in the writ
petition.
17. The High Court in its limited scope of judicial review examined
the matter as a Court of Appeal reappreciated the evidence threadbare
and based on the same set of evidence(oral/documentary) reversed the
finding of fact recorded by the Tribunal and observed that the contract
to be sham and bogus and observed as under:-
"41. As we have found the contract to be not genuine but mere
camouflage in the facts and circumstances and considering
prohibition notification under Section 10(1) of CLRA Act, inevitable
conclusion is that the contract labours have to be treated as
employees of the principal employer.
42. Considering the large number of workers involved in the instant
case and the notification issued under Section 10 of CLRA Act,
the regular workmen have to be ultimately employed by the SAIL.
We decline to grant the backwages to the workers in the instant
case. It would not be appropriate to saddle the huge liability of
back wages. However, we direct that the SAIL to start the process
of regular employment. The workers who were in the employment
from 1993 till 1996 are ordered to be reinstated, and their cases
be considered for regularization in accordance with the directions
issued by the Apex Court in para 125 of Steel Authority of India
Ltd. and others vs. National Union Waterfront Workers and others
(supra)."
18. The judgment of the High Court dated 6th September, 2010 is
a subject matter of challenge before us in these appeals.
19. Sh. Ranjit Kumar and Sh. Parag P. Tripathi, learned senior
counsel for the appellant submit that the CGIT in its award dated 16th
September, 2009 has not only extensively considered the oral and
documentary evidence placed on record but also took note of the judgment
of the Constitution Bench of this Court in Steel Authority of India Ltd.
and Others(supra) and being the appropriate industrial adjudicator, after
going into merits and the evidence led by the respective parties to the
contract between management SAIL and contractors, arrived to the
conclusion that the contract was genuine and not sham and bogus under
its award dated 16th September, 2009 and the finding of fact recorded by
DIRECTOR STEEL AUTHORITY OF INDIA LTD. v. ISPAT
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the Tribunal has attained finality and unless the approach of the Tribunal
was wholly perverse in the sense that the Tribunal has acted on no
evidence, it was not justified for the High Court to interfere over the
award of the industrial adjudicator sitting as a Court of First Appeal to
reappreciate the evidence and even if on the basis of the material on
record, two views are possible and one view has been expressed by the
Tribunal it was not open for the High Court to substitute its view under
the limited scope of judicial review under Sections 226 and 227 of the
Constitution of India. In the given circumstances, the finding of fact
which has been reversed by the High Court under its impugned judgment
holding the contract is not genuine but a mere camouflage, is legally not
sustainable and deserves to be interfered by this Court.
20. Learned counsel further submits that normally the industrial
adjudicator is the final Court of facts and on its extensive discussion
based on the material available on record, it was held that there is no
employer and employee relationship between the appellant and
respondent workmen and, therefore, the question of compliance of Section
25(n) of the Act does not arise and it was the contractor who had
terminated their services in April 1996 and it was the contractor who
had full control and supervision over the work of the labourers. It has
also concluded after examining the witness and appraisal of the
documentary evidence on record that the wage slips and identity cards
were issued to them by the respective contractors and it were the
contractors who paid wages to the contract labour and few of the
witnesses have also supported payment through contractors.
21. Thus, the conclusion which has been arrived at by the Tribunal
that the contractors were exercising exclusive control over the contract
labours and tools and equipment were supplied by the contractors as per
the terms of the contract and payment was made by respective
contractors to the contract labourers and not by the principal employer
and it was the contractors who terminated the services of the contract
labourers because they proceeded on illegal strike in April 1996 and all
the agreements between the management and the contractors entered
into are of prior to the notification dated 17th March, 1993 prohibiting
employment of contract labour and subsequently it was only extended
by the competent authority from time to time until the services of the
contract labour were terminated, holding disciplinary powers against the
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contract labour being supported by the cogent evidence on record was
not open for the High Court to sit as a Court of Appeal and reappraised
the evidence under its impugned judgment.
22. Learned counsel placed reliance on the judgment of this Court
in Dena Nath and Others Vs. National Fertilisers Ltd. and Others3
and submits that mere violation of the prohibition notification under Section
10(1) of the CLRA Act would not entail absorption of the contract labour
and at the best could be considered as further continuation to be illegal
resulting in penal consequences envisaged under Section 23 to 25 of the
Act.
23. Per contra, Sh. Colin Gonsalves, learned senior counsel for
the respondent, on the other hand, while supporting the finding recorded
by the High Court in the impugned judgment further submits that the
Tribunal has committed a manifest error in not appreciating the
documentary/oral evidence on record and thus on reappraisal of the
evidence, the High Court was convinced that the finding of fact recorded
by the Tribunal under its award dated 16th September, 2009, being
perverse, based on no evidence, has rightly interfered and recorded a
finding that the contract was sham and bogus and in consequence thereof
in terms of the Constitution Bench judgment of this Court, the workmen
became employee of the principal employer (SAIL) in the instant case
and entitled for the wages payable to the regular employee of the appellant
SAIL and be considered for regularisation of service.
24. Learned counsel further submits that the employees are entitled
for the back wages which has been wrongly denied by the High Court
without any justiciable reasons and as they are contesting their claim
immediately after their services were terminated, the delay in fact has
caused because of 3-4 rounds of litigation and was also due to the fact
that earlier it was held by this Court in Air India Statutory Corporation
and Others case (supra) that immediately on the issuance of a prohibition
notification under Section 10(1) of the CLRA Act, the contract labour
become entitled for automatic absorption in the establishment wherein
he was working prior to passing of the notification under Section 10(1)
of the CLRA Act, which has been although overruled by the Constitution
Bench of this Court in Steel Authority of India Ltd. and Others(supra)
at a later point of time but at least there are no latches on the part of the
DIRECTOR STEEL AUTHORITY OF INDIA LTD. v. ISPAT
KHADAN JANTA MAZDOOR UNION [RASTOGI, J.]
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employees and they are entitled for wages for the period they have
worked and discharged their duties in the establishment of SAIL and
denial of their actual wages by the High Court in the impugned judgment
is legally not sustainable.
25. Learned counsel further submits that High Court has taken
note of various tests for determining nature of contract which has been
laid down from time to time by the judicial pronouncements i.e. supervision
and control, effective and absolute control, disciplinary action, payment
of wages etc., the primary tests as the determining factor in arriving to a
conclusion as to whether any contract entered in contradistinction to
the tests laid down, if any, between the contractor and the contract labour
that indeed is sham and bogus.